Richard Sneider - Treasurer & CFO John Fan - Chairman, President and CEO.

Josh Buchalter - Needham & Company.

Good morning and welcome to Kopin Corporation's First Quarter 2015 Conference Call. Today's call is being recorded for Internet replay. You may access an archived version of the call on Kopin’s Web site at www.kopin.com. With us today from the Company are Chairman and Chief Executive Officer, Dr. John C.C. Fan; and Chief Financial Officer, Mr.

Richard Sneider. Thank you, Mr. Sneider, please go ahead..

Thank you, operator. Welcome, everyone and thank you for joining us this afternoon. John will begin today's call with a discussion of our strategy, technology and markets. I will go through the 2015 fiscal first quarter results at a high level, John will conclude our prepared remarks, and then we'll be happy to take your questions.

I would like to remind everyone that during today's call, taking place on Tuesday, May 05, 2015, we will be making forward-looking statement as defined in the Private Securities Litigation Reform Act of 1995.

These statements are based on the Company's current expectations, projections, beliefs and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those forward-looking statements.

Potential risks include, but are not limited to, demand for our products, operating results of our subsidiaries, market conditions and other factors discussed in our most recent Annual Report on Form 10-K and other documents filed with the Securities and Exchange Commission.

The Company undertakes no obligation to update these forward-looking statements made during today's call. And with that I will turn the call over to John..

Thank you, Rich. And thank you all for joining us today. 2015 has gotten off to a very strong start. As we made a very good progress in the first quarter both in increasing revenue and growing development dollars.

We again saw solid growth in our military revenues, while our significantly increased development dollars also our tier-1 very tier-1 partners, and reflect that Kopin is increasingly becoming the top choice when partners seek to create wearable solutions.

Our achievement in this quarter was another step in solidifying Kopin's position as the leading provider of technologies and solutions for the coming wearable world. Our first quarter year-over-year military revenue grew fourfold due largely to orders for our thermal weapon sights and will carryover from the 2014 order.

We also announced last week a $1.8 million order, this first production order is from Rockville for our super high brightness and super high reliability as XGA displays. They are to be used in the pilot helmets in the F-335 fighters which they believe are the most advanced and sophisticated fighters ever built. Kopin is a sole supplier.

This is an example of viability to develop and manufacture products for the most emerging environments. One of our key differentiator in the military sector, we also continue to make progress with precision acquisition target systems or PAT which I discussed last quarter.

This system uses our augmented reality super bright optical systems and our advanced compositional algorithm. [Test] ahead of targeting accuracy for assisting bright holes and cuts. We expect to enter multiple licensing agreements in 2015. The wearable space took a very big step forward in the past few weeks we’ve been discussion with EcoWatch.

We’d estimate 2 million to 3 million units already sold, I do not need to tell you about enthusiasm with which customers has created new entry into the wearable categories. While it’s not the first smartwatch ever introduced Apple's version comfits that users want useful functions and high quality wearables.

When a product beats or exceed the expectations the demand will outstrip supply, these types are really to Kopin’s core competencies as our advanced display technology, optics and voice capabilities are truly industry leading. This explains why the two tier one global companies are currently ramping into production using our technology.

We expect their products will be introduced to the market shortly and generate revenue this quarter. We exited first quarter with tremendous and terrific momentum in the wearable space, and we see this momentum will continue in quarter two. We’ll also make rapid progress with our own consumer wearable headsets applications.

It is our belief our consumer applications like Apple watch the wearables would be accessories to the smartphones. In addition as I mentioned last quarter we continue to believe the Asian market will be the most important early adopters for consumer [headsets].

With Asia so important Kopin direction we are pleased that we made another key management hire this quarter in sales rep, sends Kopin in the newly created position of General Manager of China operations leveraging in the Sprint, AT&T, Nokia and Motorola Mobility among other China based operators.

Our ability to attract the highest caliber talent to Kopin continues to help us distant from competitor both in terms of our technology and relationships. We look for this trend to continue. Let’s spend a moment commenting on Augmented Reality, AR or Virtual Reality VR. Over the years Kopin has been actively involved with various AR and VR projects.

In fact the PAT systems and the F-35 helmet system I just referred to are essentially augmented reality systems overlaying symbology on the real world theme to increase situation awareness. We have received additional increase from quite a few companies both new and old partners who have interest in this VR and AR space.

We continue to straightening up our IT positions. In quarter one, we have filed 10 additional patents bringing our total patents and patent pending to close to 300. Richard will review -- will spend some time reviewing our financial details in depth. But one metric I would like to focus is our cash balance.

We’re more than 87 million in cash and no debt, Kopin has liquidity to make the investment necessary to aggressively pursue the wearable market. As a reminder we have been very aggressive in technology and product developments for wearable during the past few years. And yet has successfully maintained our excellent and strong financial positioning.

Also as a reminder, we have a note of $15 million due to us early next year.

We have recently noted another very encouraging trend, we now enjoy definitive significant development dollars for our tier-1 partners as they understand the unique benefits Kopin brings in quickly turning their wearable technology and wearable strategy into tangible products.

So to summarize we are excited about our Q1 progress and this early indication that we are on track to achieve our business goals for 2015 and beyond.

Our solid momentum is continuing through second quarter and we’re pleased with our continued progress in providing the leading wearable companies with unmet unmatched innovation and technology and development capabilities.

Our partner appreciate not only our technological capabilities but also appreciate our manufacturing quality capabilities as integrated by continued strength in delivering top quality products to our military. The wearable world is now taking shape largely mirrors the view Kopin has when we move mobile into this space a few years ago.

While it’s too early it’s getting very exciting and gratifying that Kopin is now playing such a key role in this emerging market. I will now turn the call to Richard to discuss our Q1 results in greater detail..

Thank you, John. Beginning with the results for the quarter, total revenues for the first quarter of 2015 were 8.6 million compared with 4.7 million for the first quarter of 2014. The increase in Q1 revenue year-over-year was primarily driven by military revenues which were 4.6 million in Q1 of 2015 as compared to 1 million in Q1 2014.

Before we go to operating expenses it is important to remember that our expense structure is not tied to the current quarterly revenues or fiscal year revenue projections which were our long term goals. Cost of goods sold for the first quarter was 74.1% of product revenue compared with 100% for the first quarter of last year.

The improvement was due to an increase in sales of military products which have a higher gross margin as compared to our other products. R&D expense for the first quarter of 2015 was 4.9 million compared with 5.1 million in the first quarter of 2014 essentially flat.

SG&A expenses were 4.4 million in the first quarter of 2015 as compared to 5 million in the first quarter of 2014. The decline in first quarter of 2015 as compared to the same quarter in 2014 primarily resulted from lower professional fees.

Other income and expense was income of 2.2 million for the first quarter of 2015 as compared with income of 480,000 for the first quarter of 2014. The first quarter of 2015 included approximately 800,000 gain from the sale of investments and approximately 1.3 million non-cash gain on the mark-to-market of warrant as classified as derivative assets.

Regarding the 1.3 million non-cash gain this is our current estimate and which should refer to our Form 10-Q expected to be filed this Thursday May 07, 2015 for final disposition.

Other income and expense also includes approximately 180,000 of foreign currency loss in the first quarter of 2015 as compared with approximately 180,000 foreign currency gains in 2014. Turning to the bottom line.

Our net loss for the quarter was 3.8 million or $0.06 per fully diluted share compared with a net lot of 9.1 million of $0.15 per diluted share in the first quarter of 2014. First quarter and year-end amounts depreciation and stock compensations are attached in the table to the Q1 press release. And with that I’ll turn it back over to John..

I think we'll open for questions. And thank you for participating in our call and I would like to remind you our Annual Meeting is this Friday May 08 and at 9 o'Clock at Morgan Lewis at 1 Frederick Street Boston. Please do [indiscernible] by any case please do vote. Thank you, now we are open for questions..

Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Rajvindra Gill from Needham & Company. Please proceed with your question..

This is Josh Buchalter in for Rajiv. So could you help us understand a little bit better the military upside and how we should be thinking about it in the second half of the year? I believe you’ve said on the last earnings call you have some better visibility around April 1st timeframe.

So is there any update you can provide there?.

Well, we do have, we have received additional orders and we’ll be announcing those I think shortly, I guess I am announcing it now but we’ll give you a greater detail shortly. But unlike last year around this time where we received a large order it looks like and maybe more [peace mill] this year.

So we do have a little bit more visibility but we really don’t have full year guidance..

And then do you have any 10% customers in the second quarter?.

The same folks that were 10% last year were 10% for the quarter which would be Ratheyon and Google..

And then last question from and I’ll hop in the queue.

I believe you mentioned about possibility of signing some licensing deals or with the enterprise wearables or could you provide anymore color on those?.

This is John Fan I think that we have licensing deals with wearables but we also expect licensing deals in the military world especially with the system PAC that’s the acquisition target acquisition systems, so we’re very happy to see licensing so far our technology systems..

[Operator Instructions]. Matt Robinson.

Your line is live, can you hear us?.

The question is about any greater color you could add on your business with the Asian consumer market and how that might be developing?.

Who am I addressing to?.

This is Brian on behalf of Matt..

The question is about the Asian market especially on the wearable I believe the Asian market is a very attractive market because we think in the wearable especially the wearable we are concentrating on the consumer world will get separately to smartphones which achieved lower function in the wearable lower -- at lower price but yet they have simple systems so we’re seeing a lot of activities in Asia because of that..

And then second question would be in terms of PAC licensing, could you give any more color or clarity on the magnitude that we should be thinking about that, in that regard?.

When you said magnitude what specially are you referring to? I mean what will happen is the way we typically -- so we will license our technology we’ll then go to a developing period which typically takes anywhere from six to nine months and then products get introduced.

And so we’re working right now we’re in discussions with a number of folks potentially license the technology and our goal is to have some of those licenses wrapped up by this year and hopefully by the end of next year you start seeing products..

Any greater color you could add in terms of the U.S.

market, or how that might -- might be any geographical split?.

We’re focused right now on the U.S. market and not the overseas markets to be honest with you. And so there were certain over the last 10 years certain issues identified with the current systems and we think that we can get the military probably 80% of what they’re looking for today.

There is a number of programs that the military has that are scheduled for like the 2021 period we’re offering a value equation and said he we can get to 80% of what you want right now and that’s what attracted to a number of the partners that we’re discussing..

There are no further questions in the queue. I’d like to hand the call back to management for closing comments..

Thank you for joining us. And hope to see you in the Annual Meeting this Friday. Thank you..